Stronger bank stocks led the Australian share market higher after the central bank defied expectations by lifting interest rates. At the close, the benchmark S&P/ASX200 index was up 2.9 points, or 0.06 per cent, at 4,701.4, while the broader All Ordinaries index had gained 2.4 points, or 0.05 per cent, to 4,773.3 points.

On the ASX24, the December share price index futures contract was up three points at 4,703, with 21,106 contracts traded. Commonwealth Bank led the gains made by most of the big banks following the Reserve Bank of Australia's (RBA) decision, which lifted the cash rate by 25 basis points to 4.75 per cent at its November board meeting on Tuesday. Speculation for an increase actually eased last week after official figures showed lower than expected inflation for the September quarter.

Commonwealth finished up 88 cents, or 1.78 per cent, at $50.19. It announced before the market closed that it had lifted its variable home loan interest rate by 0.45 basis points to 7.81 per cent - higher than the cash rate rise. Westpac, ANZ and National Australia Bank have yet to make statements. Westpac finished up 26 cents, or 1.13 per cent, at $23.31, and ANZ closed 13 cents higher at $25.03, while National Australia Bank ended one cent lower at $25.88. Other financials finished lower. AXA Asia Pacific ended down eight cents at $5.46, AMP dropped six cents to $5.31 and Macquarie Group was 25 cents weaker at $36.15.

The major miner's closed mostly lower. BHP Billiton lost three cents to $42.27 and Rio Tinto ended down 28 cents at $82.71. Fortescue Metals was 11 cents higher at $6.42. Leighton Holdings was the worst performer on the S&P/ASX 50, after it said it would downgrade first quarter profit by $85 million due to problems associated with the Brisbane Airport Link project, and effect of the strong Australian dollar on earnings. Leighton ended down $2.55, or 7.02 per cent, at $33.75.

At 16:33 the spot price of gold in Sydney was $1,356.60 per fine ounce, down $7.31 from Monday's local close of $1,363.91. Gold miner Newcrest Mining closed down 44 cents at $39.93. Westfield Group was the highest performer on the S&P/ASX 50 before it was placed in a trading halt while it prepared to make an announcement about a possible transaction. Shares in the retail property group last traded up 24 cents, or 1.91 per cent, at $12.81.

The Australian dollar surged in Asian trading Tuesday after the Reserve Bank of Australia surprised the market by hiking its cash rate for the first time in six months. Last quoted, the Australian dollar traded against the US Dollar at $0.9980, up from $0.9887 late Monday. Against the Japanese yen, the currency traded at Y80.385, up from Y79.63.